Raise Rates? This is When the Fed Typically Lowers Them!

The historical market, monetary, and economic data manipulation that is destroying the world – and likely, will send it to war – has made the last few months (heck, the last fouryears) unfathomably miserable for those prudently seeking to protect themselves from the Financial Apocalypse that mathematically must occur. To wit, in the past month alone; specifically, since the Fed commenced its lunatic “December rate hike or bust” scheme – in a hopelessly misguided attempt to “save face” – seemingly all events have been paradoxically bullish for stocks; neutral at worst for Treasury bonds; and of course, bearish for gold and silver. In other words, the same shenanigans as usual, in this (temporarily) PPT, Fed, and Cartel-dominated world. Only this time, in hyper-drive.

Collapsing corporate earnings, commodities, and currencies; major terrorist events – yielding expanding, global military conflict; plummeting economic data; burgeoning secession movements; historic corporate scandals; hyper-inflationary debt ceiling suspensions; major municipal and sovereign credit downgrades – from Puerto Rico, to Saudi Arabia, to the city of Chicago; plunging high yield bonds; negative sovereign interest rates; unfettered QE announcements; and – well, you name it – it’s ultimately been “interpreted” as negative for gold and silver; positive for stocks; and at worst, neutral for Treasury bonds. Let alone, news of record physical gold and silver demand; collapsing inventories; and an imploding mining industry, which has clearly passed peak gold and silver production. Heck, these days, gold and silver are just as likely to plunge when the “copper PPT” gooses “Dr. Death” – I mean, copper – by 5% in ten minutes, as when copper plunges, of its own accord, by that same amount.

To that end, today’s headline that “European stocks jump because inflation rate disappoints” says it all; as such government-produced data was seamlessly synchronized ahead of the ECB’s potentially world-destroying meeting tomorrow – in which it is widely expected that “Goldman Mario” will againexpand its open-ended QE and NIRP schemes; possibly, with unprecedented “extraordinary measures” that could pave the way for the collapse of the Euro itself. And likely, take it below parity with the dollar in short order, completing a stunning 24% plunge in a mere 18 months – that has neither improved Europe’s economy, or prevented political revolutions; social unrest; and draconian government measures from exploding across the dying continent. Ironically, under the purview of doing “whatever it takes” to save it.

Conversely, here in the United States of Money Printing and Market Manipulation, the S&P 500 hit Goldman Sachs’ year-end 2016 price target yesterday – following news that the ISM Manufacturing Index unexpectedly plunged into recessionary territory; as Treasury yields plunged to nearly the same levels as when said “rate hike or bust” operative commenced last month. Meanwhile, WTI crude oil, on the heels of yet another “unexpectedly” large inventory build plunged toward $41/bbl; the Treasury announced that the national debt rose $674 billion in November alone; auto sales depicted deeply disturbing trends regarding (2008-like) margins and inventories; and the Gallup Economic Confidence Index remained at multi-year, recessionary lows. Heck, the Atlanta Fed’s own “GDP now” tracking mechanism lowered its 4Q GDP “growth” estimate from 2.3% a week ago to just 1.4% (Wall Street still assumes 2.5%); and even that number is suspect, given that just two weeks ago, amidst the mindless chaos of the aforementioned “rate hike or bust” operative, let the data manipulation cat out of the bag – in proclaiming “inflation isn’t as low as you think.” Which, anyone holding health insurance can attest, is the understatement of the century.

Throw in Brazil’s catastrophic GDP implosion – which may push the dying “BRIC” into political chaos before the Olympics commence; America officially putting “boots back on the ground” in Iraq – joining the “boots” it just sent to Syria; the CEO Economic Roundtable survey plunging to its weakest “confidence” level in three years; and a new survey proclaiming more young Americans believe the “America Dream” is dead than at any time since the survey commenced 30 years ago; and you can see how ludicrous the concept of never-ending stock price increases has become. To that end, John Hussman quantitatively demonstrates how we have reached the “most extreme point of stock market overvaluation in history”; whilst David Stockman, in yet another brilliant piece, notes that “when peak debt is reached, additional credit never leaves the financial system; but instead, just finances the final blow-off phase of leveraged speculation in the secondary markets.” Let alone, when aided by “manipulation operatives” from East to West” – like the U.S. and Chinese “plunge protection teams,” whose mandate is to not only support stock indices daily, but eliminate volatility via the “dead ringer” and “hail mary” algorithms I identified nearly four years ago.

Conversely, the Cartel’s maniacal destruction of paper gold and silver prices – and subsequently, the means of production – has taken global physical demand to record levels; in the process, reducing above-ground inventories to fumes. To wit, the COMEX’s registered (available-for-delivery) gold inventory plunged another 10% yesterday – to an all-time low level of just 121,000 ounces, worth a measly $128 million. And this, as the amount of contracts still open on the expired December contract are six timesthis amount. I mean, can the COMEX farce actually continue after all its gold is gone – as demand relentlessly rises? Let alone, as Cartel “commercials” sit on the cusp of going long for the first time in 14 years? For that matter, can equity markets – PPT-supported or otherwise – continue to rise amidst collapsing economic data, corporate earnings, commodity prices, currencies, and geopolitical stability.

Fortunately, as Bill Holter espoused yesterday – and “Economic Mother Nature,” for as long as man has walked the Earth – none of it can go on forever. Clearly, the physical Precious Metals shortages that have plagued the industry since the 2008 crisis – at which point, the Cartel went “all-in” suppressing paper prices – will only grow more acute as the aforementioned, wildly PM-bullish trends expand exponentially. Equally clearly, the “powers that be’s” grip on “last to go” markets like paper PMs and the “Dow Jones Propaganda Average” will eventually be lost as well – certainly in real terms – just as their grip on commodities, currencies, high yield bonds, and lesser stock indices has been broken already. At which point the “Yellen Reversal” that must inevitably arrive – when the Fed is forced to admit the economy is collapsing, and expand its cancerous money printing – will signal, once and for all, the “end of belief Central banks can save us”; and conversely, foster the beginning of the universal realization that their hyper-inflationary, economy-deforming policies have, to the contrary, destroyed us.

To that end, from a purely quantitative standpoint, the most incredible aspect of the aforementioned “December rate hike or bust” scheme – aside from market Treasury rates falling – is the fact that by all objective measures, today’s economic environment, in nearly all aspects, is identical to those that yielded Federal Reserve rate reductions over the past decade. Not to mention, QE’s 1, 2, and 3.

Oh, high-yieldrates are certainly rising – but decidedly NOT due to improving financial conditions; particularly in the commodity space, where E&P producers are on the verge of the largest-scale defaults since the 2008 mortgage crisis. As for government bonds, the benchmark 10-year Treasury yield remains at a paltry 2.17%, despite the past months’ relentless “rate hike” propaganda. And given the exploding worldwide “final currency war” – highlighted by the ECB’s potentially historic announcement tomorrow – sovereign yields in nearly every “first world” economy are either zero or negative. In “top credits” like Germany and Switzerland, on short- and long-term bonds alike. To that end, given the dollar’s already explosive, manufacturing-killing surge to multi-year highs, if the Fed is stupid enough to shoot itself in the head by raising rates – even if by just a smidgen – it will only destroy already-collapsing U.S. corporate earnings – and real, non-BLS-fabricated “employment” – further, given what other Central banks within the “dollar index” basket are simultaneously doing. Which again, shouldn’t have the slightest negative impact on Precious Metals prices, despite relentless propaganda to the contrary.

As for economic activity itself, I don’t need to rehash the fact that U.S. economic data is as weak as at any time since the 2008 crisis; in most ways, far worse – such as debt outstanding, labor participation, real wages, manufacturing activity, and home ownership, to name a few. Even the Fed itself is predicting that this year, amidst the so-called “recovery” supporting their rate-hiking aspirations – GDP “growth” will fall to its lowest level since 2009. And this, despite “re-defining” GDP to include countless non-producing activities, and “double-seasonally adjusting” data to create “growth” out of thin air. Not to mention, when the Fed Vice Chair himself admits “inflation is not as low as you think”; thus, admitting GDP growth is overstated, perhaps significantly so. Let alone, as the BLS admits that the ultimate non-productive sector, healthcare, is by far the largest component of said “growth.” Which I assure you, will not be the case next year, as Obamacare fires the “bullet to the head of the 2016 economy.”

Adding to the forensic quantitative evidence, is the fact that the last time the aforementioned CEO Economic Roundtable’s economic outlook was this low, the Fed launched QE3. And heck, the last time the ISM Manufacturing Index plunged to the 48.6 level, the Fed launched QE1 – in 2008; and in 2012, QE3. I mean, seriously, look at thischart of where the PPT-supported stock market stands compared to U.S. manufacturing activity. That is, if you don’t have vertigo!

Oh, and did I mention that global economic activity has ground to a halt – to levels much worse than the 2008 crisis? Not that I haven’t discussed these matters ad nauseum; but suffice to say, all-time lows in the Baltic Dry and Chinese Containerized Freight indices; a 40-year low in the CRB Commodity index; and record high, parabolically rising debt levels are certainly not factors that typically yield Central bank tightening. Particularly when all other Central banks, as we speak, are aggressively easing, at an exponentially expanding rate!

Look, I’m just a “simple analyst,” using logic to determine the most likely course of events. To that end, I’ll put my economic track record in league with any of the most celebrated minds in the world – many of which, are famous more for their charisma, or proficiency at spewing propaganda, than their calls. And frankly, never have I felt more vindicated in what I have forecast; or confident of what’s coming – such as, for instance, QE and NIRP “to infinity,” from the Fed and all Central banks. That said, there is no way of knowing when the historic manipulation of markets – to mask said economic reality – will completely unravel. Most importantly, in “last to go” markets like paper gold and silver; even if logically, it should happen “any day now.”

Of course, the “debate” about what the Fed will or won’t do is but noise at this point; as after seven years of relentless money printing – which frankly, goes all the way back to the 2000 “tech wreck” – we are quantifiably amidst the “worst global economy of our lifetimes”; as well as a mountain of parabolically rising debt; unprecedented industrial overcapacity; and collapsing commodities and currencies. And oh yeah, record physical gold and silver demand; vanishing inventories; and the worst production outlook in, perhaps, centuries.

To that end, we can only emphasize that Precious Metals – in physical form – have always been the most effective way to preserve wealth over time. And barring a new, divinely-inspired alchemy, will continue to be for generations to come. And given that said Cartel is currently subsidizing them at, for all intents in purposes, record low prices, never has there been a more opportune time to own them.

3 Comments

RF
on December 2, 2015 at 3:20 pm

Wow Andy, I don’t know how you keep up with all of it, but you do an excellent job.

The word recovery in the USA is just another ponzi sheme. You will have a bananna republic without a middle class and you can’t have a middle class without a manufacturing base, which we lost our manufacturing base years ago to first Mexico and then China.

This is NOT rocket science and any one that believes there is a recovery is a victim of the bankers ponzi scheme.

Andy, Thank you for your continued devotion to realism in this Fed fantasy land pm holders have been subjected to and forced to endure. As a friend of mine put it earlier this evening, all good jobs have been shipped overseas to take advantage of slave wages, accounting standards have been changed to book debt as profit, corporations have been buying back their stocks with cheap money, and the list goes on and on! Like G Edward Griffin said many years ago, its an appearance of the 4th Kind! “People think this will go on forever, and boom it comes crashing down and people lose their assets”. For now black is white and white is black until its not. Sooner or later and I guess evidently later then anyone could have imagined, any rational person would have to think that this cannot and will not last. I look forward to economic mother nature prevailing ASAP.

Goldbug
on December 3, 2015 at 12:55 pm

Good article.

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